they allow the use of profits generated in one market and improve the competitive position in another.

Turnkey Contract Advantage

ability to earn returns from process technology skills in countries where FDI is restricted

Turnkey Contract Disadvantage

*creating efficient competitors
lack of long-term market presence

Exporting

is a common first step in the international expansion process for many manufacturing firms

How do most firms begin their international expansion?

with exporting

Tariff barriers can make it uneconomical to use which mode of entry?

exporting

All of the following statements are disadvantages of exporting EXCEPT

exporting may help a firm achieve experience curve economies.

Which of the following is an advantage of exporting?

Allows a firm to achieve experience curve and location economies.

The greater the pressures for cost reductions are, the most likely a firm will want to pursue some combination of:

exporting and wholly owned subsidiaries.

Licensing Agreement

an arrangement whereby a licensor grants the rights to intangible property to another entity (the licensee) for a specified time period, and in return, the licensor receives a royalty fee from the licensee

An arrangement whereby a licensor grants the rights to intangible property to another entity for a specified time period in exchange for royalties is a(n) _____ agreement.

licensing

A primary advantage of _____ is that the firm does not have to bear the development costs and risks associated with opening a foreign market.

licensing

A disadvantage of licensing is

lack of control over technology inability to realize location & experience curve economies

Another disadvantage of licensing is

Inability to engage in global strategic coordination

Which of the following is NOT a drawback of licensing?

Licensing can become unprofitable due to trade barriers and transportation costs.

Under a(n) _____ agreement, a firm might license some valuable intangible property to a foreign partner, but in addition to a royalty payment, the firm might also request that the foreign partner license some of its valuable know-how to the firm.

cross-licensing

Which type of agreement is believed to reduce the risks associated with licensing technological know-how?

Cross-licensing agreement

Although they are similar, _____ tends to involve longer-term commitments than:

franchising; licensing.

Advantages of _____ are low development costs and risks.

franchising and licensing

Franchising is employed primarily by:

service firms

Because the _____ typically assumes most costs and risks, he or she has the incentive to build a profitable operation as quickly as possible.

franchisee

Which entry mode has low development costs and risks?

Franchising

Which entry mode has a lack of control over quality?

Franchising

The magnitude of the advantages and disadvantages associated with an entry mode is NOT determined by:

the surface area of the country

A _____ entails establishment of a firm that is jointly owned by two or more otherwise independent firms.

joint venture

Which of the following is NOT a disadvantage of joint ventures?

a joint venture is the most costly and risky choice

Which of the following is a disadvantage of joint ventures?

*lack of control over technology
*inability to engage in global strategic coordination
*inability to realize location & experience economies

What is the advantage of joint venture?

*access to local partner’s knowledge
*sharing development costs and risks
*politically acceptable

The advantages frequently associated with entering a market early are commonly known as:

first-mover advantages

Which of the following is a first-mover advantage?

create switching costs that tie customers into their products or services.

What are disadvantages associated with entering a market early commonly known as?

first-mover disadvantages

The ability to preempt rivals and capture demand by establishing a strong brand name is an example of:

first-mover advantages.

Which theory suggests that in case where there may be important first mover advantages, governments can help firms from their countries attain these advantages?

strategic trade theory

Suzi’s Sleds, Inc. is considering establishing a subsidiary in Japan, where there are no other incumbent competitors to acquire. Suzi’s would do best in Japan with a(n):

green-field venture.

The big advantage of establishing a(n) _____ in a foreign country is that it gives the firm a much greater ability to build the kind of subsidiary company that it wants.

greenfield venture

Greenfield strategy

building a subsidiary from the ground up

Which venture is risky?

greenfield

All of the following are advantages of acquisitions EXCEPT

it is easy to realize synergies by integrating the operations of the acquired entites

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